When Everton majority shareholder Farhad Moshiri sat down with a US consortium in March, it was initially with a view to discussing investment opportunities for the club’s new stadium development.
With the project on the city’s waterfront gathering pace, Moshiri was looking to secure a loan. After sustained investment since his arrival in 2016, he accepted others needed to come on board to take the scheme forward.
But what started as a search for stadium investment has spiralled into something else altogether in recent months. Multiple parties are understood to be interested in purchasing Everton, with a consortium led by former Chelsea and Manchester United chief Peter Kenyon agreeing an exclusivity deal.
Moshiri may retain a minority stake when all is said and done but the general feeling in the football industry is that the club are now very much up for sale.
Plenty of questions remain. Would the new owners front the money for Everton’s stadium development or look to secure a loan in the private sector? Would they be willing to allow Moshiri to stay in a position of relative power?
But one of the most important surrounds the price. How much are Everton actually worth?
In 2016, Moshiri’s investment saw the club valued at £175 million. Six years later, the numbers have more than doubled.
Despite a relegation scare on the pitch last season and three successive years of heavy losses off it, totalling close to £400 million, some reports have suggested anyone wanting to buy Everton outright would have to pay in the region of £500 million. And that’s before another potential outlay of £500 million on the stadium development.
These are eye-watering figures, but do they hold water?
The Athletic spoke to a range of industry experts to find out.
Valuing a football club is a complex matter, and the subject of much debate.
In his role as director of Deloitte’s Sports Business Group, Tim Bridge is frequently consulted on price by prospective buyers and sellers. As he explained to The Athletic earlier this year, there is no one accepted or fool-proof way of assessing a club’s worth.
“Compared to other industries, the valuation approach in football is quite immature — we still don’t have a fixed model for doing it,“ Bridge said. “If we were talking about a ‘normal’ company, you would do a discounted cash-flow analysis, where you estimate future cash flows, discount the cost of capital and bring it back to a present-day value.
“But most football clubs are not run like normal companies — their revenues are inconsistent and they make losses. There is an intrinsic quality of clubs as community assets and that is why we always come back to revenue multiples as our starting point.
“We typically use a revenue multiple of 1.5 to 2.0 for a mid-tier Premier League club. We’d then look at net assets, the club’s brand value and the stadium. It is more art than science but starting with a revenue multiple makes the most sense.”
Based on reported revenue of £193 million in their 2021 accounts, Deloitte’s multiple would see Everton initially valued somewhere between £300 million and £400 million — quite a way off some of the figures doing the rounds.
Football finance expert Kieran Maguire agrees that some of the higher figures in the media appear “optimistic”.
“We’ve just seen Newcastle, with their extra stadium capacity (52,500, compared to just under 40,000 at Goodison Park), go for around £305 million,” Maguire says. “Everton are yet to build their new ground, so I think this is a ‘wish price’ from Moshiri. It’ll be him looking to recoup as much of his investment as he can.
“Any new buyer is going to have to find another £500 million for a new stadium. They can either fund that themselves or loan the money but interest rates are going up.”
Maguire has worked with fellow football finance expert Dr Tom Markham on a methodology for valuing Premier League clubs. The Markham Multivariate Model, as it is known, uses a fixed set of financial criteria – hard economic data – to come up with a ‘rational’ value for clubs.
Based on those 2021 numbers, Markham and Maguire’s model values Everton at just under £300 million when adjusted for the £120 million loss made.
Four years ago, Maguire valued Everton around £60 million higher than that figure. But the scale of the club’s losses in the intervening period has taken a toll, at least as far as the model is concerned.
“Moshiri has been benevolent but he’s racked up big losses, and this has impacted Everton’s value,” Maguire says. “The key for Everton is finding that sweet spot where they invest smartly and still move forward (on the pitch).
“Even qualifying for the Europa League brings in around £40 million to £45 million a year in income. The Champions League is £100 million to £150 million. The valuation I’ve produced is on the basis of Everton not qualifying for Europe in four out of every five seasons.
“There’s a drop in Everton’s value in our model from 2018 to 2020, which is all to do with the losses they made after Moshiri’s investment. If the spend had been converted into higher finishes, then the value of the club would have come out a lot higher.”
Ultimately, though, clubs are only worth what potential buyers are willing to pay for them. And as the recent £4.25 billion purchase of Chelsea attests, there is still a demand for Premier League clubs, particularly in the US.
“It’s still a relatively healthy market, as the Chelsea takeover shows,” Maguire says. “There is a market for Premier League clubs, especially among American investors and those from the Middle East. The new TV deals around the world show the level of interest in the league as a whole.
“Very few Premier League clubs are for sale at any one time, so there is more focus on the ones that are available.”
It is rare that any top-flight club in England are so actively up for grabs, although many owners are of course open to investment — at the right price. Rarer still that a club such as Everton, one of the founding members of the Premier League and nine-time champions of England, are available. Despite substantial losses and last season’s flirtation with relegation, The Athletic has been told by multiple sources that Everton remain an attractive proposition for US investors.
“They are established in the Premier League,” Maguire says. “Everyone in the US has heard of the city of Liverpool in a way they don’t always know other places outside of London so well.
“There are long-standing links with the US. Liverpool has its own airport. That’s attractive to American investors, because they can get there easily.
“There’s also a feeling from US investors that Premier League clubs are relatively undervalued compared to NFL franchises and there is room for growth there.”
Where some see risk, others sense opportunity.
Jordan Gardner is an American sports executive who is currently chairman and co-owner of Danish second division side Helsingor.
He is not surprised his countrymen are interested in the opportunity of investing in Everton, even if the club’s relegation scare last season raises the risk factor for potential new owners. Not too far away from Goodison at Burnley, of course, that risk has become a reality 18 months after the takeover by US firm ALK Capital.
“Everton will have been an attractive prospect in the past, and they still are,” Gardner says. “The brand is still strong and it’s from a variety of angles that you can say they’re still an attractive investment.
“They’re in a good location, have a good fanbase and history. I’d say the club could be worth £500 million.
“But at the same time, people know that last season they just stayed in the division and alongside that the talk in investor circles is of a club being run badly.
“Most Americans prefer to go to bigger clubs in the established top six because generally, unless something really goes wrong, they don’t have to worry about relegation. Americans aren’t familiar with the relegation risk in their own sports and they don’t like it from an investment point of view.
“So there’s risk with Everton, definitely. They were nearly down last season and could always be in a similarly difficult position next season.”
Gardner thinks the clamour to be involved at clubs in Europe’s big domestic leagues will not be subsiding any time soon, despite the feeling that some US investors are forking out more than they should be.
“I think a lot of Americans are coming to the UK and over-paying,” he says. “They are so desperate to get into Premier League football that they are spending whatever it takes.
“There is a lot of wishing and hoping in the industry too. The Americans who have just bought Lyon (US businessman and Crystal Palace shareholder John Textor bought a majority stake in the Ligue 1 club on Tuesday) are talking about competing with Paris Saint-Germain for trophies next season.
“When you’re investing the big money then, of course, you’ll be optimistic and talk about things like that or getting back into Europe.
“You can talk big about Everton. Are they going to qualify for Europe next season? Or are they better incrementally improving on their league position and carrying on building their stadium?
“Whatever way you look at it, it’s still true that, for US investors, Premier League clubs are undervalued. Generally, there’s a feeling among US investors that European football clubs are not maximising revenue and can be run unprofessionally, where they may benefit from being run more strongly in a commercial sense.”
Football Benchmark is a financial consultancy specialising in the game which, as part of its data analysis, produces an annual report valuing clubs it considers to be among Europe’s elite.
For its estimate, it works off a club’s enterprise value (EV). This is considered to be the sum of the market value of the owners’ equity, plus total debt, less cash and cash equivalents — calculated via a revenue multiple approach.
It also considers five “pillars of value” when assessing clubs; profitability, popularity, sporting potential, broadcasting rights and stadium ownership.
This year’s report, which was published last month and makes reference to valuations on January 1 2022, ranks Everton 22nd on the list of 32 clubs with a value of £379 million. That means they are valued above last season’s Europa League winners Eintracht Frankfurt (£361 million) and its Europa Conference League champions Roma (£347 million) as well as Sevilla, who have lifted the UEFA Cup/Europa League six times (£328 million).
According to the report, Everton’s enterprise value has reduced by just one per cent since 2016.
Antonio Di Cianni, head of football economics at Football Benchmark, says owning current stadium Goodison and its forthcoming replacement at Bramley-Moore Dock boosts the club’s enterprise value.
“For someone selling Everton, you’d want to include some of the future benefits of the new stadium into the price during negotiations for a better deal,” Di Cianni says. “And, for example, from a buyer’s perspective that can be helpful if your intention is to sell the club in, say, three to five years.
“But staying in the Premier League was absolutely vital. If they had gone into the Championship and lost their share of the top-flight broadcasting revenue and global exposure when they play clubs like Chelsea, Manchester City or Liverpool, Everton’s value would have been hugely damaged.”
Everton’s great escape, it would seem, was worth far more than just their supporters’ sweat and tears.
Along with the growing lure of English clubs to a queue of wealthy Americans, it could yet trigger a whole new era.
For all the complex metrics, though, the price they pay remains to be seen.
(Top photo: Naomi Baker/Getty Images)